A loan to Alberta’s Orphan Well Association is being proposed by the Alberta government to assist in reclaiming about 152,000 abandoned or inactive oil and gas sites.
The government proposes to borrow $235 million for the loan and provide it to the OWA at a more favourable interest rate than it could access on its own.
Alberta Energy Minister Margaret McCuaig-Boyd said May 18 that the legislation has been introduced and is designed to speed up the management of Alberta’s many orphaned wells.
The number of abandoned sites was exacerbated by the drastic economic downturn in the oil and gas industry that forced many energy companies out of business or into bankruptcy.
If the legislation passes, the province would finance the loan using $30 million from the federal budget, said a government news release. It would be repaid over 10 years from the orphan fund levy paid by the energy industry.
The plan is also expected to create up to 1,650 jobs in reclamation work over the next three years.
“By enabling this work to happen right away, we’re able to reduce the backlog of orphan wells throughout Alberta while maintaining our polluter-pay principle,” McCuaig-Boyd said in the release.
Energy site reclamation work involves removing equipment, sealing wells and ensuring safety for the public.
Abandoned sites have become a concern for many farmers, ranchers and other landowners. Many who are concerned about reclamation have deemed funding for the OWA to be inadequate. Its annual budget is $30 million and as of March it had 2,084 orphaned wells slated for closure.
Last year it closed 185 wells.
The government said the OWA budget will increase to $60 million in 2019-20, paid by industry levies.
Daryl Bennett, director of the Alberta Surface Rights Federation, which has many farmer and rancher members, said “polluter-pay” is definitely the way to proceed.
“Speeding up the reclamation process will benefit landowners by preventing contamination, removing obstructions to farming operations and improving the food safety of crops and animals,” said Bennett in the news release.
Nikki Way, analyst with the Pembina Institute, also applauded the move.
“Orphaned wells pose a significant environmental risk for communities and the landowners who have inherited these impacts with no responsible owner.”
Pembina is encouraged by this effort in parallel with the ongoing efforts to review and reform the existing inadequate rules in place to address root causes of this problem and ensure that liabilities for cleanup are not transferred to Albertans.”
The government said it plans to improve existing policies for managing old oil and gas wells.
- Orphan: A well or facility confirmed not to have anyone responsible or able to deal with its closure and reclamation.
- Inactive: A well or facility where activities have stopped due to technical or economic reasons. Some may be reopened and produce again.
- Abandoned: A site permanently dismantled and left in a safe condition.
- Remediation: The process of cleaning up a contaminated well site to meet specific soil and groundwater standards.
- Reclamation: The process of replacing soil and re-establishing vegetation on a well site so it can support activities that it did before it was disturbed.